You might be asking yourself why you should start a private lending IRA. The better question should be why shouldn’t you? A private lending IRA offers you a ton of benefits over traditional retirement savings. Let’s take a look at what a private lending IRA has to offer.
Huge Growth Potential
A private lending IRA offers you an amazing opportunity to grow your retirement account savings balance faster than any traditional IRA or 401k can. How? This is because a private lending IRA allows you to set the rate of your return. Let me explain. With a traditional IRA, Roth IRA or company sponsored 401k, the rate of your return is set by the financial markets. When the markets are up, your rate of return can exceed 10% or more. When markets are down, you might actually be in the negative. Because financial markets experience such volatility, your average rate of return over a 12 month period will usually hover around 5% to the positive, at least when we aren’t experiencing a huge recession like the one in 2008.
Private lending IRAs, on the other hand, allow you to lend the money you have saved in your retirement account to others, much like a bank would. In this scenario, you set the rate of return on your investment through the interest you charge on the loans you make. Want a consistent 5% rate of growth? Charge 5% interest on your loan. Want more? Charge more. The rate of your return is in your hands.
You can also control how much money you receive in earnings by controlling the terms of the loans you make. For example, you can make more on a loan if you allow for borrowers to make interest only payments for a period of time over repaying interest and principle from the beginning. This is because you keep the balance of the loan intact for longer, keeping the amount of money you are charging interest on higher.
Insurance Against Loss
With other types of retirement accounts, you run the risk of losing your entire savings when markets go bad. However, with a private lending IRA, you can actually protect your account from loss. This is because when you make loans, you have to obtain a promissory note from the borrower. This means that you have the opportunity to repossess property that is purchased with the proceeds of the loans you make. In every case, the collateral pledged against the loan is worth more in the marketplace than the balance of the loan because private lending IRAs require you to maintain a 75% loan to value ratio. This means that if you have to repossess, you can sell the property for more than the balance owed, offsetting the risk of loan defaults.
Private lending IRAs are a great way for you to increase your wealth fast while protecting your savings from loss in a way that no other traditional IRA or 401k can. Take the first step towards true financial stability in your retirement and open one today.
Private Lending IRA Benefits
Private lending IRAs offer you a range of benefits that other IRAs simply can’t match. If you are thinking about opening a retirement account, these are a few things you should keep at a forefront of your mind about private lending IRAs when it comes to which type of account you should open.
Control Over Your Rate of Return
A private lending IRA is one of the only types of IRAs that allows you to actually control how much you can make off of your investments. This is because with a private lending IRA, you can charge whatever interest rate you and your borrower agree on. Here’s how it works:
Private lending IRAs allow you to lend the money you have saved in your retirement account to others, much like a bank would. In this scenario, you set the rate of return on your investment through the interest you charge on the loans you make. Want a consistent 5% rate of growth? Charge 5% interest on your loan. Want more? Charge more.
With typical retirement accounts, you don’t have nearly as much control. The rate of the return you can expect to receive on your investment isn’t set by you. It is set by the financial markets. When the markets are up, your rate of return can exceed 10% or more. When markets are down, you might actually be in the negative. Because financial markets experience such volatility, your average rate of return over a 12 month period will usually hover around 5% to the positive, at least when we aren’t experiencing a huge recession like the one in 2008.
Insurance Against Loss
Private lending IRAs are one of the only types of retirement accounts that offer you protection against loss. With other types of retirement accounts such as traditional and Roth IRAs, 401ks and even most alternative types of retirement savings accounts, you run the risk of losing your entire savings when markets go bad. However, with a private lending IRA, you can actually protect your account from loss.
How is this possible? It works the same way that traditional loans work. Think about this for a second. When you borrow a large sum of money, your lender will ask you to pledge collateral against the loan in order to offset the risk. This is the same principle that works in a private lending IRA scenario. Your borrower will sign a promissory note that gives you the right to repossess the property in the event they default on the note, giving you the right to sell it on the open market to recoup your losses. And, because the IRS requires the investment to have a loan to value ratio of 75%, you won’t have to worry about not being able to recover all of your money in a default situation.
Private lending IRAs are a great way for you to increase your wealth fast while protecting your savings from loss in a way that no other traditional IRA or 401k can. Take the first step towards true financial stability in your retirement and open one today.